================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------------------
SCHEDULE 14D-9
(RULE 14d-101)
SOLICITATION/RECOMMENDATION STATEMENT UNDER SECTION 14(d)(4)
OF THE SECURITIES EXCHANGE ACT OF 1934
----------------------------------------
LANDS' END, INC.
(Name of Subject Company)
LANDS' END, INC.
(Name of Person Filing Statement)
COMMON STOCK, PAR VALUE $0.01 PER SHARE
(Title and Classes of Securities)
---------------------------------------
5115086106
(Cusip Number of Class of Securities)
---------------------------------------
DONALD R. HUGHES
SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
LANDS' END, INC.
ONE LANDS' END LANE
DODGEVILLE, WISCONSIN 53595
(608) 935-9341
(Name, Address and Telephone number of Person Authorized to Receive
Notices and Communications on Behalf of the Person(s) Filing Statement)
---------------------------------------
with copies to:
KARL DAHLEN ROBERT S. OSBORNE, P.C.
SENIOR LEGAL OFFICER KIRKLAND & ELLIS
LANDS' END, INC. 200 EAST RANDOLPH DRIVE
ONE LANDS' END LAND CHICAGO, ILLINOIS 60601
DODGEVILLE, WISCONSIN 53595 (312) 861-2368
(608) 935 9341
[x] Check the box if the filing relates solely to preliminary communications
made before the commencement of a tender offer.
================================================================================
Thursday May 16, 8:30 am Eastern Time
Press Release
SOURCE: Lands' End, Inc.
Lands' End Reports Sales and Earnings for First Quarter
DODGEVILLE, Wis., May 16 /PRNewswire-FirstCall/ --
Lands' End, Inc. (NYSE: LE - News), the direct merchant of classically styled
apparel and home furnishings, today reported results for its first quarter of
fiscal year 2003, ended May 3, 2002.
.. (Photo: http://www.newscom.com/cgi-bin/prnh/20020403/LELOGO )
---------------------------------------------------
Total revenue for the first quarter just ended was $341 million, up 10 percent
from $311 million in the prior year's first quarter. Net income for the quarter
was $16.5 million, and diluted earnings per share were $0.54, compared with net
income of $5.9 million, or $0.20, for the same period last year.
On May 13, 2002, Lands' End announced that it had entered into a definitive
agreement with Sears, Roebuck and Co. for Sears to acquire 100 percent of the
outstanding common stock of Lands' End in a cash tender offer for $62 a share or
approximately $1.9 billion (the "Transaction").
LANDS' END
FIRST QUARTER HIGHLIGHTS AND COMMENTS
Segment merchandise sales data for first quarter (in millions)
Percent
1Q03 1Q02 Change
Core business segment $198 $173 + 14.4%
Specialty segment 85 86 - 0.9%
International segment 32 28 + 12.5%
Total merchandise sales $315 $287 + 9.6%
Internet $79 $ 54 + 46.3%
Segment merchandise sales data (full-price and liquidation sales)
excludes shipping and handling revenue. Internet merchandise sales are
included in the respective business segments.
In the quarter just ended, growth in the core business segment was led by
strength in the women's division. The co-ed division showed modest growth, and
men's showed a modest decline. In the specialty segment, the Kids and Home
divisions were relatively flat; and Business Outfitters was slightly down. All
international businesses had strong sales increases when measured in their local
currencies, and overall international sales in U.S. dollars were improved from
last year.
Gross profit for the quarter just ended was $157 million, or 46.0 percent of
total revenue, compared with $132 million, or 42.4 percent of total revenue in
the prior year. Merchandise gross profit margin rose due to higher initial
margins from improved sourcing, as well as from lower levels of liquidations and
lower provisions for inventory reserves. Lower liquidations of excess inventory
were due to a change in timing of our post-holiday clearance catalog that
shifted revenue into the fourth quarter of last year.
Liquidation of excess inventory was 8 percent of net merchandise sales for the
first quarter, compared with 11 percent in the prior year. Inventory was $216
million as of May 3, 2002, up 9 percent from $198 million at the same time last
year. Inventory is currently in line with the sales increase and with planned
levels, and the quality of inventory is improved from the prior year.
For the first quarter this year, selling, general and administrative expenses
were $131 million, up 8 percent from $121 million in the prior year. As a
percentage of total revenue, SG&A was 38.5 percent, compared with 39.0 percent
in the prior year. Stronger customer response resulted in increased productivity
per catalog page, resulting in relatively lower catalog costs. These
improvements were partially offset by higher accruals for employee compensation
and profit-sharing expense, both due to improved profitability.
BUSINESS OUTLOOK
On April 9, 2002, Lands' End updated its business outlook and filed it with the
Securities and Exchange Commission on a form 8-K. Because of the Transaction, no
further guidance is being provided at this time.
CANCELLATION OF CONFERENCE CALL AND WEB CAST
The conference call and Web cast previously scheduled for 9:30 CT, May 16, 2002,
will not be held.
Lands' End is a direct merchant of traditionally styled, classic products
offered to customers around the world through regular mailings of its monthly
and specialty catalogs and via the Internet at http://www.landsend.com.
STATEMENT REGARDING FORWARD-LOOKING INFORMATION
Statements in this release that are not historical, including, without
limitation, statements regarding our plans, expectations, assumptions, and
estimations for the Transaction or for fiscal 2003 revenues, gross profit
margin, and earnings, as well as anticipated sales trends and future development
of our business strategy, are considered forward-looking and speak only as of
today's date. As such, these statements are subject to a number of risks and
uncertainties. Future results may be materially different from those expressed
or implied by these statements due to a number of factors. Currently, we believe
that the principal factors that create uncertainty about our future results are
the following: customer response to our merchandise offerings, circulation
changes and other initiatives; the mix of our sales between full price and
liquidation merchandise; overall consumer confidence and general economic
conditions, both domestic and foreign; effects of weather on customer purchasing
behavior; effects of shifting patterns of e-commerce versus catalog purchases;
costs associated with printing and mailing catalogs and fulfilling orders;
dependence on consumer seasonal buying patterns; fluctuations in foreign
currency exchange rates; and changes that may have different effects on the
various sectors in which we operate (e.g., rather than individual consumers, the
Business Outfitters division, included in the specialty segment, sells to
numerous corporations, and certain of these sales are for their corporate
promotional activities). Our future results could, of course, be affected by
other factors as well. Also, the Transaction is not yet completed and is subject
to a two-thirds minimum tender condition. More information about these risks and
uncertainties may be found in the company's 8-K and 10-K filings with the S.E.C.
The company does not undertake to publicly update or revise its forward-looking
statements even if experience or future changes make it clear that any projected
results expressed or implied therein will not be realized.
ADDITIONAL INFORMATION
This release is neither an offer to purchase nor a solicitation of an offer to
sell securities of Lands' End. At the time the tender offer (referenced above)
is commenced, Sears, Roebuck and Co. will file a tender offer statement with the
U.S. Securities and Exchange Commission, and Lands' End will file a
solicitation/recommendation statement with respect to the offer. Investors and
Lands' End stockholders are strongly advised to read the tender offer statement
(including an offer to purchase, letter of transmittal and related tender
documents) and the related solicitation/recommendation statement because they
will contain important information. These documents will be available at no
charge at the SEC's Web site at http://www.sec.gov and may also be obtained by
calling (800) 732-7780 and selecting option three.
Preliminary and unaudited
CONSOLIDATED STATEMENTS OF OPERATIONS
Lands' End, Inc., & Subsidiaries
(Amounts in thousands, except per share data)
Three months ended
May 3, April 27,
2002 2001
Revenue
Net merchandise sales $314,628 $287,117
Shipping and handling revenue 26,547 24,003
Total revenue 341,175 311,120
Cost of sales
Cost of merchandise sales 157,914 154,913
Shipping and handling costs 26,325 24,263
Total cost of sales 184,239 179,176
Gross profit 156,936 131,944
Selling, general and administrative expenses 131,292 121,438
Income from operations 25,644 10,506
Other income (expense)
Interest expense (281) (233)
Interest income 498 636
Other 745 (1,536)
Total other expense, net 962 (1,133)
Income before income taxes 26,606 9,373
Income tax provision 10,110 3,515
Net income $16,496 $5,858
Basic earnings per share $0.55 $0.20
Diluted earnings per share $0.54 $0.20
Basic weighted average shares outstanding 30,004 29,380
Diluted weighted average shares outstanding 30,553 29,620
Preliminary and unaudited
CONSOLIDATED BALANCE SHEETS
Lands' End, Inc., & Subsidiaries
(In thousands) May 3, April 27,
2002 2001
Assets
Current assets:
Cash and cash equivalents $114,422 $26,591
Receivables, net 17,388 17,140
Inventory 215,717 197,561
Prepaid advertising 18,742 20,801
Other prepaid expenses 9,738 7,378
Income taxes receivable -- 397
Deferred income tax benefits 15,905 10,973
Total current assets 391,912 280,841
Property, plant and equipment, at cost:
Land and buildings 117,624 104,880
Fixtures and equipment 107,872 103,512
Computer hardware and software 118,366 105,334
Leasehold improvements 4,877 4,642
Construction in progress -- 7,461
Total property, plant and equipment 348,739 325,829
Less - accumulated depreciation and
amortization 154,971 138,134
Property, plant and equipment, net 193,768 187,695
Other assets 2,696 2,214
Total assets $588,376 $470,750
Liabilities and shareholders' investment
Current liabilities:
Lines of credit $16,502 $21,573
Accounts payable 69,275 67,152
Reserve for returns 7,238 7,287
Accrued liabilities 51,727 35,626
Accrued profit sharing 2,373 755
Income taxes payable 13,944 --
Total current liabilities 161,059 132,393
Deferred income taxes 11,376 17,251
Shareholders' investment:
Common stock, 40,221 shares issued 402 402
Donated capital 8,400 8,400
Additional paid-in capital 39,777 32,358
Deferred compensation (37) (103)
Accumulated other comprehensive income 958 4,477
Retained earnings 572,499 494,945
Treasury stock, 10,208 and 10,834 shares at
cost, respectively (206,058) (219,373)
Total shareholders' investment 415,941 321,106
Total liabilities and shareholders' investment $588,376 $470,750
Preliminary and unaudited
CONSOLIDATED STATEMENTS OF CASH FLOWS
Lands' End, Inc., & Subsidiaries
(In thousands)
Three months ended
May 3, April 27,
2002 2001
Cash flows from (used for) operating activities:
Net income $16,496 $5,858
Adjustments to reconcile net income to net
cash flows used for operating activities-
Depreciation and amortization 7,258 6,235
Deferred compensation expense 19 18
Deferred income taxes (1,462) 2,684
Loss on disposal of fixed assets 276 --
Tax benefit of stock options 209 450
Changes in assets and liabilities:
Receivables, net (4,091) 2,668
Inventory 11,503 (9,350)
Prepaid advertising (3,032) (3,174)
Other prepaid expenses (1,377) (275)
Accounts payable (14,088) (29,016)
Reserve for returns (2,146) (1,774)
Accrued liabilities 4,128 (4,779)
Accrued profit sharing (2,408) (1,602)
Income taxes payable (11,013) (13,610)
Other (2,416) (454)
Net cash flows used for operating activities (2,144) (46,121)
Cash flows used for investing activities:
Cash paid for capital additions (6,742) (9,361)
Net cash flows used for investing activities (6,742) (9,361)
Cash flows from (used for) financing activities:
Proceeds from short-term debt 333 4,633
Purchases of common stock (9) (4)
Issuance of treasury stock 893 2,093
Net cash flows from financing activities 1,217 6,722
Net decrease in cash and cash equivalents (7,669) (48,760)
Beginning cash and cash equivalents 122,091 75,351
Ending cash and cash equivalents $114,422 $26,591